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In the current market (2011) the focus appears to be finding foreclosed and other distressed property.
One strategy is for potential buyers to submit a lot of offers and looking at a lot of houses.
Another form of investing in real estate at a discount involves searching for properties involved in the foreclosure or short sale process. Did you know that the number of foreclosures in metro Atlanta has risen from just over 1,000 in the year 2000 to well over 20,000 in the year 2010.
This number only includes those properties that are advertised as many more homes are in default position but have not yet made it to the legal paper of the county in which the property is located.
Many of the loans should not have been made in my opinion as a no or reduced down payment has traditionally led to default in many cases based on my over 17 years in the real estate industry.
Reduced down payment requirements coupled with relaxed lending guidelines and some unscrupulous lending practices have resulted in an abundance of homes going back to lenders month after month.
Georgia And The Foreclosure Process
Let's say you stop making payments on your home loan, the lender will call or write, asking for payment. It will often try to work out a payment plan that you can live with.
And now with government incentives some lenders will bend over backward to assist you in a refinance or loan modification or other program that can keep you in your house depending on your particular situation.
However, if your situation looks hopeless, in there opinion, the lender will give up the effort to help you save your home and will notify you that it intends to foreclose on the mortgage.
The formal process begins with publication of the foreclosure notice (lis pendens) after the homeowner has received the Notice of Default (NOD), which runs for four consecutive weeks in the legal newspaper of the county where the house is located.
This notice is the “first” public evidence that the borrower is having a problem. It is during this period that many owners try to sell their homes quickly, sometimes at a discount.
If your home loan is not caught up or paid off, the foreclosure auction occurs on the first Tuesday of the month following publication. The auction is conducted on the courthouse steps by the attorney representing the lender.
The opening bid is always from the lender for the amount of the debt, plus all other fees. Other would be buyers can bid a higher amount if they choose, and homes frequently sell for less than 75% market value, sometimes much less.
The successful bidder must pay for the property immediately in cash or by certified check, and ownership transfers to the investor at that time. The previous owner becomes a tenant of the investor, and is subject to eviction.
All junior debts, (such as a second mortgages or home equity lines of credit) are wiped out at the foreclosure auction. The new owner is unaffected by these debts, even though the former owner is or may be obligated to pay.
In many cases, no one bothers to show up at the auction, so the only bid is from the lender. In that case, the lender gets ownership of the house.
Usually the lender tries to sell the house as soon as possible, simply trying to cover its investment. Most of these homes are listed with traditional real estate companies and sold through regular marketing channels.
What To Look Out For When Buying Foreclosures
There can be many pitfalls in the process of buying foreclosures.
If you purchase at auction you have no guarantee that that the property you are buying is free from IRS tax liens or past due local property taxes unless you have done your due diligence upfront prior to the auction.
In addition, you are often bidding on a house you have never fully inspected. Even so there are ways to avoid costly mistakes.
Many foreclosed homes are abandoned, in poor condition, or occupied by persons unrelated to the owners. They almost always need work, although sometimes the work is purely cosmetic (minor) in nature.
As long as you know what you are getting into and you are in a strong cash position with an adequate emergency fund purchasing a foreclosure may make sense. Even though the properties come with no guarantees (bought as-is), you can often find diamonds in the ruff.
Many Seasoned investors refer to this process as “chasing foreclosures,” and try to buy directly from the owner during (or before the (NOD) "Notice of Default" period if possible)---the publication period. As the auction nears prices tend to drop, and the activity can become highly volatile.
If no sale is made, the investor can attend the auction and make a bid “at the steps.” And if no one bids on the property, investors can try to buy the house from the lender usually after it is placed on the market by a real estate company.
Lenders often will sell for less than they paid, just to get rid of a problem property.
If a home has been on the market for several months after the foreclosure process there is a good chance that the lender will lower the price further and/or be more receptive to an offer well below the listing price.
While the entire process is complicated and many experienced investors are often present, it is a worthwhile source of leads for the serious investor.
The foreclosure process can offer you a continuous stream of homes at a great price.
That is exactly what an Atlanta area investor should be looking for. To learn more about foreclosures in Georgia return to this site frequently as updates are made throughout the year.
Also remember that if you choose to partake in a foreclosure auction be aware that those who are competing against you are more than likely seasoned pros in a strong cash position.
If they are not bidding on a property that looks like a great deal, there is probably a reason for them not bidding. In short do your homework meticulously.
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